The recent case of FCA v Arch and others  EWHC 2448 (Comm) considered whether policyholders of a number of business interruption insurance products were entitled to cover in respect of the recent Coronavirus pandemic.
Two of the wordings considered were the the MS Amlin Commercial Combined Policy (MSA1) and MS Amlin Retail Insurance Policy (MSA2). MSA1 was purchased predominantly by essential shops and other businesses (known as Category 3 and Category 4 businesses) who were not required to close under The Health Protection (Coronavirus, Restrictions) (England) Regulations 2020. MSA2 was issued to policyholders in the Retail Sector (Category 3 and 4 businesses), the Leisure Sector (Category 1 and 2), and Office and Surgeries (Category 3 and 4).
MS Amlin Commercial Combined Policy (MSA1)
The relevant parts of the policy are cited in the judgment at paragraphs 177 -181, but the main aspect of the relevant business interruption section (Section 6) is as follows:
“We will pay you for:
6. Notifiable disease, vermin, defective sanitary arrangements, murder and suicide
Consequential loss as a result of interruption of or interference with the business carried on by you at the premises following:
a) i. any notifiable disease at the premises or due to food or drink supplied from the premises;
ii. any discovery of an organism at the premises likely to result in the event of a notifiable disease;
iii. any notifiable disease within a radius of twenty five miles of the premises;
b) the discovery of vermin or pests at the premises which causes restrictions on the use of the premises on the order of the competent local authority;
c) any accident causing defects in the drains or other sanitary arrangements at the premises which causes restrictions on the use of the premises on the order of the competent local authority; or
[d)] any murder or suicide at the premises.
The maximum we will pay for any one loss will not exceed £100,000.
1. For the purpose of this additional cover premises will mean only those locations stated in the premises definition. If this policy includes an additional cover which deems damage at other locations to be insured, the additional cover will not apply to this additional cover.
2. We will not be liable for any costs incurred in the cleaning, repair, replacement, recall or checking of property.
3. We will only be liable for loss arising at those premises which are directly affected by the loss, discovery or accident. ...”
- Indemnity Period - The period beginning with the loss and ending not later than the maximum indemnity period after that during which the results of the business will be affected following the loss’
- However for the Notifiable disease additional cover the following definition applies: The period during which the results of the business will be affected following the loss, discovery or accident beginning: a) In the case of 1 and 4 [by which is meant (a) and (d) in the version quoted above] with the date of the loss or discovery;
- Notifiable Disease - Illness sustained by any person resulting from:
a) food or drink poisoning; or b) any human infectious or contagious disease (excluding Acquired Immune Deficiency Syndrome (AIDS)) an outbreak of which the competent local authority has stipulated will be notified to them.”
Consequential Loss - Loss resulting from interruption of or interference with the business carried on by you at the premises in consequence of damage to property used by you at the premises for the purpose of the business.
“The turnover during that period in the 12 months immediately before the date of the damage which corresponds with the indemnity period to which adjustments will be made as necessary to provide for the trend of the business and for variations in or other circumstances affecting the business had the damage not occurred, so that the figures adjusted represent as nearly as may be reasonably practicable the results which but for the damage would have been obtained during the relative period after the damage.”
MS Amlin Retail Insurance Policy (MSA2)
The terms of the policy were materially identical to MSA1 save that cover in respect of Notifiable disease was:
“We will pay you for:
6. ... consequential loss following: a) ...
iii. any notifiable disease within a radius of twenty five miles of the premises
And the definition of "consequential loss" was
Essentially, the main difference to MSA1 was that MSA2 covers consequential loss "following" any notifiable disease within the relevant radius as opposed to consequential loss "as a result of interruption of or interference with the business" "following" any notifiable disease within the relevant radius.
The other difference was that the definition of consequential loss in MSA2 was "following damage" as opposed to "in consequence of damage" in MSA1.
The Court's judgment of coverage under MS Amlin Commercial Combined Policy (MSA1) and MS Amlin Retail Insurance Policy (MSA2) is at paragraphs 189 - 199.
In brief, the Court held:
- The policy covers losses "resulting from business interruption at the premises following" a notifiable disease within the relevant radius.
- Unlike RSA3 and Argenta 1 they do not require "an occurrence" of the notifiable disease merely consequential loss "following" said disease. That would embrace any person who has had the disease within the relevant radius.
- As with the Eaton Gate (RSA3) wording [View the article on that policy here], the Jelf/ Marsh (RSA4) wording [View the article on that policy here], and the Argenta (Argenta 1 and Argenta 2) wording [View the article on that policy here] cover was held not to be confined to the effects of a disease occurring only within the radius, or expressly or implicitly confined to the effects only of the cases of the disease within the radius. This was made even clearer owing to the omission of any reference to "occurrence" or "manifestation."
- Cover extended to the effects of a notifiable disease from the time it is within the 25 mile radius and is "not limited to the effects only of the instances of the disease within the radius."
- It was incorrect that the reference to "in consequence of" in the definition of "consequential loss" in MSA1 imported proximate or "but for" causation. The definition on its face applied to business interruption following physical damage. The appropriate manipulation for the purposes of non material damage business interruption in MSA1 was "following" not "in consequence of", which incidentially was the terminology used in MSA2.
- The exclusion clause contained within condition 3 merely excluded claims in respect of "knock on" effects at other premises.
- Whilst the trends clause referred to damage business interruption it should be manipulated to apply to non damage business interruption, but once again all that is covered under the insuring clause must be stripped out of the "counterfactual", including "business interruption referable to COVID 19 including ia the authorities' and/ or the public's response thereto"
KEVIN HOLDER © 2020
33 BEDFORD ROW
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